Pricing for International Markets

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Course Content for BA4590

Profit and Cost Factors that Affect Pricing
Fixed costs:
- costs that do not vary with changes in production levels
Variable cost:
- costs that vary with changes in production levels
Marginal profits:
- the changes in total profit resulting from the sale of one additional unit of a product

Approaches to International Pricing: Full-Cost versus Variable-Cost Pricing

Full-cost pricing – companies insist that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost
Variable-cost pricing – the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.

Types of Costs

Transportation Costs: depends on the mode of transportation
Tariffs: usually levied on the landed costs
- Tariffs and reclassification:
Local Taxes
- Value-added tax (VAT) in EU and Asian countries
  - A tax that is levied at each stage in the production and distribution of a product or service based on the value added by that stage; the tax is ultimately passed on to the buyer
- Sin Tax
  - Tax assessed on products that are legal but discouraged by society
  - Luxury Tax
Local Production Costs
Channel Costs
- A function of channel length, distribution margins, and logistics

Market Factors That Affect Pricing

Income Level
Competition
Culture:
- Price haggling and group buying
- Number superstition

Environmental Factors that Affect Pricing

Exchange rate

BIG MAC INDEX

Inflation Rate:

Environmental Factors that Affect Pricing

Price Controls
- Common in developing countries partly to combat inflation
- Also in some developed countries:
  - UK: Pharmaceutical Price Regulation Scheme

Managerial Issues In Global Pricing

Managing Export Price Escalation:
- The substantial rise of retail price of an export product due to the additional costs
- Strategy 1: accept the price disadvantage and adjust the market positioning
- Strategy 2: reengineer its products to be less costly or grant a discount

Copyright 2008, by the Contributing Authors. Cite/attribute Resource. factadmin. (2008, June 23). Pricing for International Markets. Retrieved November 24, 2009, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/business-administration-1/global-marketing-strategy/BA4590/pricing-for-international-markets. This work is licensed under a Creative Commons License.

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Pricing for International Markets

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	Info Pricing for International Markets Document Actions Course Content for BA4590 Profit and Cost Factors that Affect Pricing Fixed costs: costs that do not vary with changes in production levels Variable cost: costs that vary with changes in production levels Marginal profits: the changes in total profit resulting from the sale of one additional unit of a product Approaches to International Pricing: Full-Cost versus Variable-Cost Pricing Full-cost pricing – companies insist that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost Variable-cost pricing – the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets. Types of Costs Transportation Costs: depends on the mode of transportation Tariffs: usually levied on the landed costs Tariffs and reclassification: Local Taxes Value-added tax (VAT) in EU and Asian countries A tax that is levied at each stage in the production and distribution of a product or service based on the value added by that stage; the tax is ultimately passed on to the buyer Sin Tax Tax assessed on products that are legal but discouraged by society Luxury Tax Local Production Costs Channel Costs A function of channel length, distribution margins, and logistics Market Factors That Affect Pricing Income Level Competition Culture: Price haggling and group buying Number superstition Environmental Factors that Affect Pricing Exchange rate BIG MAC INDEX Inflation Rate: Environmental Factors that Affect Pricing Price Controls Common in developing countries partly to combat inflation Also in some developed countries: UK: Pharmaceutical Price Regulation Scheme Managerial Issues In Global Pricing Managing Export Price Escalation: The substantial rise of retail price of an export product due to the additional costs Strategy 1: accept the price disadvantage and adjust the market positioning Strategy 2: reengineer its products to be less costly or grant a discount Copyright 2008, by the Contributing Authors. Cite/attribute Resource. factadmin. (2008, June 23). Pricing for International Markets. Retrieved November 24, 2009, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/business-administration-1/global-marketing-strategy/BA4590/pricing-for-international-markets. This work is licensed under a Creative Commons License.